CHINA / National

Oil prices raised, subsidies promised
By Le Tian and Wang Ying, Yin Ping (China Daily)
Updated: 2006-03-27 06:01

The Chinese mainland lifted its processed oil prices yesterday to offset refinery losses and bring domestic prices closer to international levels, but promised to subsidize disadvantaged communities and public service sectors.

Ex-factory gasoline prices will be increased by 300 yuan (US$37.5) per ton while the cost of diesel oil will rise by 200 yuan (US$24.9) per ton, the National Development and Reform Commission (NDRC), the industry regulator, said yesterday. Retail prices for gasoline will also rise by 250 yuan (US$30.8) per ton, while diesel prices will rise by 150 yuan (US$18.5) a ton, it said.


A gas station employee in Shanghai fills up a car next to a sign showing the newly raised prices. [newsphoto]


A fuel station in Zhengzhou, central China's Henan Province, displays oil prices in this October 14 file photo. [newsphoto]

The decision was made because the nation's current prices of processed oil are far below those on the international market, it said.

"This is not beneficial to oil refineries and at the same time does not help ensure adequate supplies and improve energy efficiencies," it said in a circular published yesterday.

In Beijing, retail prices for 93 RON grade gasoline rose to 4.65 yuan (about 58 US cents) a litre from 4.26 yuan (about 53 US cents), and zero-grade diesel prices increased to 4.04 yuan (50 US cents) a litre from 3.74 yuan (46 US cents), the capital city's development and reform commission said in a separate statement, the Bloomberg reported yesterday. RON is the research octane number that indicates the quality of the gasoline.

PetroChina said last week that it lost 19.8 billion yuan (US$2.4 billion) on refining and fuel sales in 2005.

To offset the impact of the rises to groups sensitive to higher prices, the commission said the State Council has decided to offer subsidies to communities such as fishermen, farmers, State-owned forestry enterprises and urban public transportation firms.

Oil prices have rocketed since 2003, with crude oil reaching more than US$60 per barrel on the international market this year, far higher than the price paid for the commodity by domestic users. Prior to the price hikes, the retail price of domestically processed oil was only about US$43 per barrel.

The taxi and public transport sectors have borne the brunt of these rising prices.

Xue Chunsheng, a manager of the Beijing Yuyang United Taxi co Ltd, said yesterday's price rise would increase his company's daily costs by at least 30 yuan (US$3.7) per vehicle.

With its more than 4,000 taxis, the price rise will result in an additional monthly cost of 3.6 million yuan (US$448,000) for Xue's company. "We are expecting the government to unveil preferential policies to help the industry," Xue said.
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